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Enlightenment Through Understanding

America is Still #1

May 7, 2014

To the disappointment of the left, the fiscal cliff turned out to be a speed bump, sequestration had no negative effect on the economy (also a correct prediction), and Facebook is now 50% higher than its IPO price. We were right about the payroll tax increase not hurting consumer spending and record high student loan debt and record high S&P 500 profit margins being sustainable. The liberals want economic contraction so that the 1% lose money, but it refuses to happen. The liberals’ shrill cries for fiscal restraint, regulation, class warfare, recession and de-leveraging keep being ignored.

America is impervious to everything. We have the best consumers, best stock market, best fed, best currency, best real estate market and the least civil unrest. A weak job number and or the slightest intimations of tensions and Russia and those long term yields drop. We need more student loan debt and higher healthcare costs to discourage hoarding and keep healthcare stocks surging. We need more defense spending, too

As shown below, there’s so much liquidity that stocks and treasuries are rallying together:

Anyone that used the dysfunctional congress as an excuse to bet against equities, the U.S. consumer, the fed, or bondholders lost their shirt. Those that insist America is in decline ignore the overwhelming data that show it isn’t.

If it’s ‘revolution’ you seek, look overseas. It won’t happen here.

The debt binge is sustainable. The U.S. couldn’t be further from a debt crisis. Our ability to meet our obligations is jeopardized only by politics, not fundamental economic weakness. Bondholders know this and that’s why they never entertained the possibly of a true default during the October 2013 debt-standoff. They knew eventually they would get paid once the fighting subsided and, sure enough, the competent congress cobbled together a last minute compromise. Correctly, we were bullish on stocks and treasuries and reaped large returns following the resolution. Members of congress, like any rational individuals, don’t want their own personal investments go up in smoke by allowing the U.S. to default on its debt. This is why the 1% should govern America because they are economic stakeholders and thus have a vested interest in not catering to anti-growth activism on the left or the right. It’s better for congress to do too little and let the free market police itself than rock the boat with unnecessary regulation, only getting involved when absolutely necessary like during crisis.

The world is awash with liquidity as evidenced by plunging yields and rising stock prices, a counter-intuitive development we predicted would happen in 2011. Most experts, including some bulls, predicted incorrectly that stocks would rise at the expense of of treasuries, but not both of them rising together. We’re probably the only ones that predicted this.

Liberals, your thought leaders like Piketty, Krugman, Robert Reich, and Joseph Stiglitz are ignored. The people that run the economy – CEOs, Wall St., Silicon Valley, the 1% – don’t care about inequality, sorry. Let’s face it, it’s a great time to be rich and smart, especially in America. People are getting richer than ever in an era of hyper-consumerism, spendism, smartism, and hyper-capitalism. Real estate in the West and East coast is booming with all cash bidding wars. Tech companies that were created just a couple years ago such an Air B&B and Snapchat are worth billions of dollars. The creative class is running victory laps around and increasingly whiny and dwindling middle class that is still hung-up on unemployment, debt, wealth inequality and unimportant stuff like that. Weak GDP is good for stocks because it means QE forever. More people out of work is good for productivity & earning and means more QE. Anyone with an idea and some coding can have a net-worth $100 million dollars in just a few years. A meritocracy in overdrive. Dow 18,000 soon. An era of unending wealth creation, if only for a few.